October 25, 2013

Ninth Circuit reduces $300,000 punitive damages award to $125,000 in Title VII harassment case (Arizona v. ASARCO)

The Ninth Circuit rarely issues published opinions on punitive damages, but they issued an interesting one yesterday. 

The jury in this sexual harassment case awarded the plaintiff no actual damages, $1 in nominal damages, and $868,750 in punitive damages against ASARCO, a copper mining outfit.  The trial court reduced the punitive damages award to $300,000, the statutory maximum under Title VII for an employee of ASARCO's size.  ASARCO appealed the award as reduced.

Judge O'Scannlain, writing for the majority, framed the issue as follows: 

We must decide whether the Constitution permits a six-figure punitive damages award in a sexual harassment suit where the jury awarded no compensatory damages and only one dollar in nominal damages.
To answer that question, the court began by evaluating the first BMW guidepost - the reprehensibility of the defendant's conduct.  The court concluded that the defendant's conduct was highly reprehensible, implicating all five of the State Farm reprehensibility factors.  I'm a little surprised the court thought the defendant's conduct implicated the "physical harm" factor, since the plaintiff did not apparently suffer any physical harm.  But the court dealt with this issue by saying intentional discrimination is a "serious affront to personal liberty" and therefore more reprehensible than other conduct that causes only economic harm.

The court turned next to the ratio between the punitive damages and the $1 nominal award.  The court concluded that a ratio of 300,000 to 1 is constitutionally excessive, even in the face of highly reprehensible conduct.  That left the court with a dilemma of choosing a smaller award that would not be excessive, but would still have some deterrent effect.  The court settled on $125,000, only because 125,000 to 1 was the highest ratio that had been affirmed in any other published discrimination case: Abner v. Kan City S. R.R. Co., 513 F.3d 154, 157 (5th Cir. 2008).

Judge Hurwitz dissented, arguing that the award should be affirmed and that Abner, although correctly decided on its facts, should not operate as a ceiling for punitive damages awards in harassment cases.